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Topic
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I’m not familiar with the terminology on bank cut-off statements. What does this mean and how can I tackle questions like this on the exam? Thanks
Question CPA-02574
On receiving a client’s bank cutoff statement, an auditor most likely would trace:
a. Prior-year checks listed in the cutoff statement to the year-end outstanding checklist.
b. Deposits in transit listed in the cutoff statement to the year-end bank reconciliation.
c. Checks dated after year-end listed in the cutoff statement to the year-end outstanding checklist.
d. Deposits recorded in the cash receipts journal after year-end to the cutoff statement.
Explanation
Choice “a” is correct. The auditor should obtain bank cutoff statements that include transactions for 10 to 15 days after year-end. The outstanding checks and deposits in transit at year-end on the bank reconciliation should agree with the information in the bank cutoff statement.
done
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